Which of the Following Statements Is FALSE

question 2

Multiple Choice

Which of the following statements is FALSE?

• A)Leverage can reduce the degree of managerial entrenchment because managers are more likely to be fired when a firm faces financial distress.
• B)When a firm is highly levered,creditors themselves will closely monitor the actions of managers,providing an additional layer of management oversight.
• C)According to the empire building hypothesis,leverage increases firm value because it commits the firm to making future interest payments,thereby reducing excess cash flows and wasteful investment by managers.
• D)Managers of large firms tend to earn higher salaries,and they may also have more prestige and garner greater publicity than managers of small firms.As a result,managers may expand (or fail to shut down)unprofitable divisions,pay too much for acquisitions,make unnecessary capital expenditures,or hire unnecessary employees.

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Definitions:

Cohesiveness

The quality of forming a united whole, often referring to the sense of solidarity or loyalty among members of a group.

Role Responsibility

encompasses the duties and obligations associated with a particular role or position within an organization or society.

Criminal Penalties

Punishments that may include fines, imprisonment, or other sentences imposed by a court for violations of criminal laws.

Tax Return

A form submitted to a taxation agency detailing earnings, deductions, and other relevant tax details.